Rethinking College? Here’s What Else You Could Do With a 529 Plan

May 29, 2023

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529 plans are commonly referred to as “college savings plans,” so it’s easy to think the money can only be used to pay for qualified college or university expenses. But did you know that they can also be used to help cover qualified education costs at other types of institutions outside of a traditional college setting?

Read on to learn about other ways you could use a 529 plan.

You could use a 529 plan to help pay for trade schools or apprenticeships

While a four-year college degree has long been the traditional path for many students after high school, there are other post-secondary education options out there beyond college that your child can pursue with the help of a 529 plan.

These options may include trade schools, qualifying online courses, registered apprenticeships, or two-year associate degree programs.

You can use your 529 plan at an eligible accredited post-secondary institution to help pay for qualified education expenses such as tuition, fee, books, supplies, etc. Generally speaking, an eligible institution is one that participates in the US Department of Education’s federal student aid programs.

You can check with the Department of Education or contact the school directly to find out if a particular vocational institution or program is eligible.

Good to know: If your kids are interested in spending some time living and studying abroad, you may be able use your 529 plan at certain foreign educational institutions as well – just make sure they are eligible.

Using a 529 plan to help send another family member to school

If you have a 529 plan, one important thing to remember is that you’re allowed to change the beneficiary on the account.

So for whatever reason, if post-secondary education just isn’t in your child’s plan for the future at all, consider changing the beneficiary to another qualified family member – for example, this could be the original beneficiary’s siblings. You can get a change of beneficiary form by contacting your 529 plan administrator.

Good to know: Changing the beneficiary may sometimes trigger a “tax event” (this means you may end up paying taxes or penalties just for making the change). Generally speaking, if the new beneficiary is a family member of the original beneficiary, there are no tax consequences for making the change.

For more information, see IRS Publication 970 or talk to your tax advisor.

You don’t have to wait until college to use the funds in a 529 account. The money can also cover qualified K-12 tuition expenses (up to $10,000 per year).

However, there are many tax considerations and implications to using a 529 plan for K-12 education, so talk to your financial or tax advisor to make sure you understand the potential benefits and drawbacks.

Using a 529 plan to help pay down student debt

Know a family member who is still trying to chip away at their student debt? You may be able to help them out!

You can use a 529 plan to help repay qualified student loans - up to $10,000 per beneficiary (and each of the beneficiary's sibling).

Talk to your plan administrator or tax advisor to understand the rules of using a 529 plan for student loans.

Using a 529 plan for yourself

When you have kids, you tend to put their needs first. But if your kid doesn’t have plans to use the 529 plan, consider making yourself the beneficiary and use the funds for yourself. Some of us may have thought about taking some classes down the road when the kids have flown the coop and we have more time to pursue our own interests.

This article is for informational purposes only and is not a substitute for individualized professional tax advice. Individuals should consult their own tax advisor for matters specific to their own taxes and. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA is not providing any financial, economic, legal, accounting, tax or other recommendations in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any of its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements of any information contained in this document and any liability therefore is expressly disclaimed.